What does probability mean if i roll a fair six sided

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Unformatted text preview: seful for reducing or dealing with complexity when applying the theory. What does probability mean? If I roll a fair six-sided die, what is the probability a six shows? How do I know? What happens if I roll the same die a million times? What does it mean for a weather forecaster to say the probability of rain tomorrow is 30%? Here is one system we could use to better understand a forecaster, based on incentives. Suppose the weather forecaster is paid p (in some monetary units, such as hundreds of dollars) if she declares that the probability of rain tomorrow is p. If it does rain, no more payment is made, either to or from the forecaster. If it does not rain, the forecaster keeps the initial payment of p, but she has to pay − ln(1 − p). In view of these payment rules, if the weather forecaster believes, based on all the information she has examined, that the probability of rain tomorrow is q , and if she reports p, her expected total payoff is p + (1 − q ) ln(1 − p). For q fixed this payoff is maximized at p = q. That is, the for...
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This note was uploaded on 02/09/2014 for the course ISYE 2027 taught by Professor Zahrn during the Spring '08 term at Georgia Tech.

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